I must first apologize - my time priorities tend to get a bit disjointed at times and without motovation I tend to lose track of projects. But again, I have to thank all of the comments and everything from people (even those I haven't spoken to in ages!) about my blog and how it's influenced people to even think about buying.
Pt 3 - Money, Mortgages and..umm.. Money
Money is a funny thing. It can change so much and cause so many problems. But at the same time, it can mean the difference between living the life you want and the life you can "deal" with. The $80k I got changed everything for me. It allowed me to purchase much closer to where I wanted to live - in a much more desirable area. That said, it still didn't push me into New Farm or anything, but it at least got me into the Brisbane City Council (BCC) Bracket.
Let me take a moment to mention Councils. Where you decide to live can make a huge difference on what happens after you put down an offer. The council catchment of where your house is located can decide many things - What your rates will be for the time you live in your house, How much you'll be paying in searching fees (more in a bit), When your bins are collected, Who represents your local area, How much your water is, If you can have 3 dogs or 1 - and so on.
It's important. Rates can drastically differ between, say, Ipswich City Council and Logan City Council. Level and quality of services can too. Some councils are contactable 24 hours a day, some only on weekdays between 9 and 5. When you're renting, you'll probably never deal with your council - when you own, they become a bit more important.
Rates are the 3rd largest ongoing tax you will pay for the rest of your home owning life. Next to Income Tax and GST - Rates can clock you for between $1400 and $2000+ per year. What they cover differs from council to council, but usually its the big three - Sanitation (Bins/Sewage), Water, Roads. You don't pay your rates, your bins don't get collected and you (may) lose your water supply. Owning a house isn't just a mortgage, it's the quarterly log of rates too.
Councils also take care of local infrastructure planning and roads. You want to renovate? You go to council. Your road looking a bit crappy? You go to council. Need to register your dashund? You go to council. Rates are based on how much your house is worth - they also include things like levies, which can be for absolutely anything. If council is pumping a ton of money into your area, for example, expect to see a nice big fat levy on your next rate bill. Rates pay for your city. Councils aren't funded by Income Taxes (Federal Government) or GST (State Government), just your rates.
Since we're talking about money, I might as well get into the other fees.
When you buy a house, there's a number of fees you need to pay. Namely - Stamp Duty, Conveyancing Fees, Mortgage Duty (sometimes) and whatever your bank charges you. These can get pretty pricey. Stamp Duty in some states for a $400k purchase can be around 3-4k, but thankfully in the past few years it's been phased out for first home purchases or purchases under a certain amount.
For example, in QLD, there is no Stamp Duty on purchases under $400,000. Nice for you guys, bad for me - I forked out $1,100 back in 2006, and that was reduced! Mortgage duty is another tax that the govt can (and usually do) charge, but the bank will usually automatically include it in your loan. How nice of them eh?
Conveyancing is the process in where your house is moved officially from the previous owner to yourself. It's usually done by a solicitor or a special agency. Most will do it for a flat fee but make sure they understand if you have a special time frame, otherwise it can drag on for ages, especially if they are a big firm and have many other (more important) clients.
It involves things like searches, where the state govt and the council provide information on the lot, make sure its zoned correctly and there's no plans to dig for uranium there or anything. They also provide the last valuation of the land, which can come in useful (you'll get it mailed to you every year anyway). Most importantly, the conveyancer will organise the process of the house deed handover (usually from one bank to another) and generally everything else.
You *can* do this yourself but definately not as quickly or as comprehensively. Your solicitor will generally take care of the lot and any problems along the way. Trust me. Pay your $600 or whatever and forget about it, you've probably got your own shit to worry about at the time. Don't be a cheap arse when it comes to this! Nothing could be worse then being caught out on a technicality when it turns out you only bought half a house or something.
Solicitors on the whole aren't too bad. They don't fuck you like REs (since you're paying them, haha) and if you find a good one like I did they do a good job and look after you. Try to stay away from the big conveyancing businesses unless you're recommended - I got some terrible service from one I initially chose and was glad I ended up using a solicitor directly.
Also take into account all the things you want or need. Air conditioning, Solar hot water, Blinds/Curtains, Furniture etc.. all these things cost money and you're not going to have any for a while, probably up to 2 years after you buy. You're going to have a lot of short term debt my friend - thank god for the FHOG right? :)
But anyway, enough about that, lets get back to the house. Now, I turned my search towards the Centenary parts of Brisbane. Suburbs including Middle Park, Jindalee, Sinnamon Park and so forth. The area was ideal - low crime rate, reasonable PT, nice communities, tons of local amenities, great highway access, only about 15mins from the city on a good day.
This search was extremelyyyyyyyyyyyyyyyyyyyyyyyyyyy taxing. Remember I mentioned The viewing grind? Well, this was it. And I mean grind. I spent day after day going through almost every single house in my price range. Over about 7 different agencies. Signed my name up to them - got calls about houses just about to go on the market. This was a blessing and a curse - I got in on the ground level about new houses but I got shown a lot of just absolutely terrible houses. I also had to take a ton of time off work.
I mentioned in another post about the uselessness of online listings - this is 100% true, especially in a sellers market. Almost every house I looked at online was either sold or was about to be sold. Take it from me - Online is great for getting an idea on market price, but not on actually looking for properties. Take some time out and scour the boards at local real estates, get your number in their phones. They update those listings on the shop windows a hell of a lot quicker then they add listings online.
Here's a tip, write down what you want. When you go look at the house tick it off. Make sure to include things like shops, schools, post offices and other amenities near by. Take a note of things like graffiti (especially on private property), rubbish, state of roads and public buildings and so on - these are a good indication of the area and whether its being looked after or invested in. Small councils with good areas and bad areas - lets just say the bad areas don't get lots of money.
I viewed non-stop for about a month or so. I went through some amazing places and some absolutely dreadful, over priced places. Then I thought I'd found a winner... or so I thought.
Check back soon for the next part of my story.
In Part 4, More on the overall story of my purchase, including the nasty surprise on my first contracted house plus Auctions and whatever else comes to mind :)
In future parts I'll also cover Stratas (Body Corporates), private listings and SPECIFIC things to watch for in contracts and a couple of other tidbits. Probably more rants about RE's too. Bastards.
Wednesday, September 17, 2008
Thursday, August 28, 2008
Apologies
I've been a bit busy with a 2 week vacation to NZ and getting back into the routine of work and normal life, so I'd had to prioritise the blog a bit.
I'll try and get part 3 up within the next few days.
Stay tuned!
I'll try and get part 3 up within the next few days.
Stay tuned!
Monday, August 11, 2008
Travel and buying a house
Since I'm just about to head off on a holiday myself, I figured it would be notable to write some things about purchasing a house and travel.
One of the first excuses people usually think up when they talk themselves out of purchasing is "I still want to travel". This is probably the easiest excuse to debunk, but it depends on what you mean by travel.
If "travel" is spending 6 months in Mongolia feeding children or 12 months in Japan teaching English, then yes, purchasing a house isn't probably for you right now. Assuming, of course, that you are leaving Australia and not coming back for a fair amount of time, you probably don't really have too many commitments (job, lease, relationships) back in the homeland.
But after you've done your year, you'll probably end up coming back anyway. What then? Once you set your life back up, you're pretty much in the same boat. But the excuse still comes back - "What if I want to travel?".
I'll assume now that "travel" means a few weeks in Bali or maybe even a month at Whistler in Canada. With this sort of travel, you'd most likely have those commitments (job, lease etc..) that you had before. You'd also probably be renting too.
So ask yourself, if you were working a fulltime job and renting, would you still go on holidays with your annual leave? Yeah, course. So why not when you have a mortgage? You have the same commitments, the only major difference is that you're paying a bit more for your housing.
The key, like anything to do with buying, is just working out money management. If you're making enough to afford house purchase, there are probably places you can save money. It may take 4-5 months, but 20 weeks x $100 is a tidy $2000. More then enough for a very fun time in Thailand.
You don't have to stop paying bills, or take out second loans, or anything like that. Just funnel money from other luxuries (games, cds, booze, clothes) into a savings account and leave it alone. In 4 months you have cash for travel and you're set to go, without credit. It's simple.
If you think I'm some sort of savings guru, believe me, I'm not. Until I bought a house, I usually spent all my disposable income in a few days. Budgeting is a skill you quickly learn.
One of the first excuses people usually think up when they talk themselves out of purchasing is "I still want to travel". This is probably the easiest excuse to debunk, but it depends on what you mean by travel.
If "travel" is spending 6 months in Mongolia feeding children or 12 months in Japan teaching English, then yes, purchasing a house isn't probably for you right now. Assuming, of course, that you are leaving Australia and not coming back for a fair amount of time, you probably don't really have too many commitments (job, lease, relationships) back in the homeland.
But after you've done your year, you'll probably end up coming back anyway. What then? Once you set your life back up, you're pretty much in the same boat. But the excuse still comes back - "What if I want to travel?".
I'll assume now that "travel" means a few weeks in Bali or maybe even a month at Whistler in Canada. With this sort of travel, you'd most likely have those commitments (job, lease etc..) that you had before. You'd also probably be renting too.
So ask yourself, if you were working a fulltime job and renting, would you still go on holidays with your annual leave? Yeah, course. So why not when you have a mortgage? You have the same commitments, the only major difference is that you're paying a bit more for your housing.
The key, like anything to do with buying, is just working out money management. If you're making enough to afford house purchase, there are probably places you can save money. It may take 4-5 months, but 20 weeks x $100 is a tidy $2000. More then enough for a very fun time in Thailand.
You don't have to stop paying bills, or take out second loans, or anything like that. Just funnel money from other luxuries (games, cds, booze, clothes) into a savings account and leave it alone. In 4 months you have cash for travel and you're set to go, without credit. It's simple.
If you think I'm some sort of savings guru, believe me, I'm not. Until I bought a house, I usually spent all my disposable income in a few days. Budgeting is a skill you quickly learn.
Monday, August 4, 2008
Experiences of a House Purchase - Pt.2
Thanks for all the comments guys, glad to know someone finds all this interesting :)
Part Two: Search and Obtain
Searching for a new home is kind of like searching for the holy grail. You know exactly what you want, and where it should be, but its almost impossible to find. No matter how close you get to the house you invision, it always slips just out of your reach. Either someone gets it before you, or its the dreaded "under contract" (more on that later), or it ends up being just outside of your price range.
You make a list of everything that you WANT. Not that you think you can get, but what you want. Pool, garage, granny flat - whatever. Then when you go out looking at houses you can tick off what they have. This makes it easier to not lose sight of what you are looking for. It's easy to get caught up in the excitement - I did. I saw all types of houses, with all different types of features. Awesome balconies on hills facing the west so you can watch the sunset. Huge double storey houses with huge bedrooms. Entertainment areas, bars.
I must have searched through a thousand listings. Online, in windows, on pamphlets. The sheer amount of properties on the market seems like a never ending tidal wave. You get calls from real estate agents trying to pimp you the latest and greatest that just came into their hands. The second you make it known you're searching its like moths to a flame.
Real Estate agents. Jesus christ, I could write an entire blog just about my experiences with them. I swear that they aren't human - they never seem to sleep, they don't seem to have any emotion and would sell their first born child to get the sale. I've had RE's lie to me through sweet smiles and not bat an eye lid. They aren't all bad though. I dealt with a lot of them.
Note: For the sake of, I dunno, kindness? I won't name names. I'll use generic companies but I'm not out to get sued for defaming anyone yeah?
When I first started looking for houses, there were a lot of areas out of my price range. I didn't know where or how to look, so I started with what I knew - online. I lived and breathed houses for months. I spent all of my spare time looking at houses online, or looking at houses in person. I bored the shit out of my friends with house talk and begged for time off work to meet RE's to do inspections.
I was trying to stay within the Brisbane City Council area, but this was VERY difficult. Areas like Acacia Ridge and Sunnybank were just out of range, the houses that came on in the price bracket were gone before I even had time to ring up. I had to move the bar out a bit furthur.
There were few areas I could afford at this point. Logan and Ipswich. For Brisbanites, most people would know they aren't the most desirable areas. But hey, we all have to start somewhere right? A house is an investment and the areas had (and still have) great growth.
Areas Circled (Click on the map to make it bigger)
I have to admit, I wasn't a fan of either areas. The better parts of both areas are still reasonably pricey and the areas within the range were in areas close to highways, dumps or had higher crime rates. That said, Haley and I were already prepared to change lifestyles for our own house, so it really came down to getting a place that we'd be comfortable living in. In any case, I preferred Ipswich to Logan simply because I preferred the west side.
I started looking around areas of East Ipswich - Riverview and other areas that sound reasonably nice but aren't. Most of the houses were pretty dumpy on in places that were almost completely desolate. One house was on a street with two other condemned places. The others were just tips. One was next door to a council dump.
Don't get me wrong, there are tons of fantastic houses in Ipswich. An extra $100,000 would have changed the game significantly, but at that point that wasn't possible. If I had chosen to invest a few years earlier I would have been even luckier, but hey, hindsight is 20/20 isnt it. There was just nothing safe, comfortable or even resembling a community around.
I spent a few more weeks looking in Ipswich but eventually decided to give up. It wouldn't have been feasible to live further West since both of us worked in Brisbane and it would have added quite a significant amount of time to journeys. I didn't really deal with any real estate agents in Ippy - most of them didn't bother to return my calls and the ones that did weren't helpful.
I changed my sights to Logan.
The market seemed to be larger for my price range there. I found quite a few properties on the web but I learnt my first lesson - houses in websites are almost never still available. The ones that are usually have something wrong with them ;)
Real Estate websites generally leave properties lying around online for weeks, usually to drum up interest so they can get you on to other properties. I'd ring up about houses and find they were "Under Contract" and weren't for sale.
Note: Under Contract is when a purchasing contract has just been signed on a house and its going under preparations for sale (waiting for finance usually). It's not a guarantee the house has been sold but legally no other offers can be put down, although some RE's might take "backup" offers, which are pretty dodgy IMO.
Sometimes the RE's would go all the way to the extent of taking me to a house and THEN telling me it was under contract. That was irritating. Save yourself some time and ask them if the house has any offers on it before they take you out.
I saw about 6 houses in Logan (when I say saw, I mean that I went inside and had a proper inspection. I drove past about 20-25 houses). All of them were with the same RE - she was quite nice. She was unusally honest too. I'd find later once I started looking back in Brisbane that she was the exception to the rule.
The only house in Logan that was remotely decent was in a place called Slacks Creek. Slacks Creek also happened to be right next to Woodridge, possibly one of the worst suburbs in Greater Brisbane. The house was on the market for $210,000 - it was a 3 bedroom, 1 bathroom with lockup garage. Pretty standard first house. Was on a little cul-de-sac with walking access (no direct car) to main road.
The house was quite new - which was different from the other dumps we were shown in the respect that it was built in the last 10-15 years, rather then 30 or so. But, it was small. Extremely small, even for two people. The bedrooms were tiny, the kitchen was even smaller and the living/diner was barely big enough for two pieces of large furniture.
On the flipside, it was in great condition, on a quiet street and close enough to shops and highway. I knocked on a few doors and talked to some neighbours (brilliant way to get local knowledge, since RE's like to bullshit a lot) and got reasonably decent responses. It was ok. Not what I ultimately wanted, but ok.
Haley didn't really like it, and I didn't blame her. We both knew we'd have to make lifestyle changes but this was more then we wanted to change. We'd be far away from everything - work, friends, family. We didn't like the area at all. The street had shopping trolleys and rubbish, junk in people's yards and such. I'd lived long enough in Brisbane to know bad areas and I knew this was one of them. Two of the neighbours said that breakins happened at least a few times a year.
Fantastic.
I mulled over this place for ages. It was a good price, under budget. The house was structually fine. I knew that if it was going to happen, this would be the place. I even had the paperwork in front of me at one point, but I just walked out on it. I just could not in good concience purchase this house. I knew that I would regret it later and everything about it felt wrong.
I gave up for a bit. Then everything changed.
I managed to sort out some creative financing that allowed me to get more money. About $80,000 or so. This basically pushed me into an entirely different pricing bracket altogether, which meant being able to purchase in Brisbane proper. Essentially, without it, I probably would still be renting right now.
I'll take a hiatus from the overall story to talk a little bit more about my experience with Real Estate agents.
I'll be blunt - I cannot stand them. Everything about them is just arrogance, greed, manipulation. There are no ethics or morals in property. In fact, one of them essentially defected and became a quite a famous voice for ethics and change in the industry - Jenman - but I'll get to him later.
RE's live off commission. They don't make any real money until they sell houses. They get salaries, of course, but the big bucks are in % cuts of final sale properties. So, the higher the sale price, the more cash they walk away with. This can be tens of thousands on one sale.
Because of this, they will do anything to secure sales. They will lie about contracts, they will lie about offers, they will push and push you to sign extremely important things without giving you time to think. They are rude - they will tell you that your offers are pathetic. They will offer you things like "backup contracts" incase other potential buyers fall through, and will even offer to call and harass them for you.
For the first house I signed a sale contract on, the RE had seen me coming a mile away. She filled the "conditions" part of the contract with so many clauses it was almost impossible to get out of it. And of course, when I found that place was full of asbestos, the sweet woman turned into a bitch from hell, almost challenging me to find a way out. I did. I also learnt a lot of valuable lessons.
Always remember - the RE works for the seller, not for the buyer. They will pretend to support you but they do not give 10 shits about you, before or after signing. Get a decent solicitor and a good friend who knows about property to deal with them.
This might sound like I'm being a bit crazy. I'm not. Ask anyone who has gone through this process and they will have stories of their own. Same situation with sellers. There are lots of good eggs but they aren't anywhere near as numerous as the bad ones. The guy who eventually sold me my house was a complete asshole, but at the very least he was efficient.
The two things I can't stress enough are these - get legals, and get advice. Make sure that anything you are going to sign is read over by a solicitor first. The RE will usually bitch about this - fuck them. This is your life and your money. Its your right and they prey on the fact you're misinformed so they can potentially fuck you to offload crap houses.
The other thing is not be afraid to bargain - the RE's will bitch about this too. Offer what YOU want, regardless of what the RE says. They may advice the seller not to take an offer, but in the end its up to them. A seller will always bargain - it just comes down to finding middle ground.
On the flip side - make RE's work for you. Get them to find you properties. Get them to take you to multiple in one afternoon. Call them at stupid hours if you need to - believe me, they're paid extremely well for it. Get them to come to you if need be. Take advantage of the fact they need the sale more then you do and
Also, take a look at Jenman's site. Jenman is a real estate agent with, *shock horror* ethics and focuses on customer care. He's written a few books and offers all of his information and help for nothing. His website is full of great advice for buyers and sellers in avoiding getting ripped off or generally fucked over by RE's.
In any case, this part went a hell of a lot longer then I thought! More in the next part - I'll try and get these out weekly.
In Part 3 (and possibly 4 and 5 at this rate!) More on the overall story of my purchase, plus Auctions, Nasty Asbestos, The viewing grind and Solicitors!
In future parts I'll also cover Stratas (Body Corporates), private listings and SPECIFIC things to watch for in contracts and a couple of other tidbits. Probably more rants about RE's too. Bastards.
Part Two: Search and Obtain
Searching for a new home is kind of like searching for the holy grail. You know exactly what you want, and where it should be, but its almost impossible to find. No matter how close you get to the house you invision, it always slips just out of your reach. Either someone gets it before you, or its the dreaded "under contract" (more on that later), or it ends up being just outside of your price range.
You make a list of everything that you WANT. Not that you think you can get, but what you want. Pool, garage, granny flat - whatever. Then when you go out looking at houses you can tick off what they have. This makes it easier to not lose sight of what you are looking for. It's easy to get caught up in the excitement - I did. I saw all types of houses, with all different types of features. Awesome balconies on hills facing the west so you can watch the sunset. Huge double storey houses with huge bedrooms. Entertainment areas, bars.
I must have searched through a thousand listings. Online, in windows, on pamphlets. The sheer amount of properties on the market seems like a never ending tidal wave. You get calls from real estate agents trying to pimp you the latest and greatest that just came into their hands. The second you make it known you're searching its like moths to a flame.
Real Estate agents. Jesus christ, I could write an entire blog just about my experiences with them. I swear that they aren't human - they never seem to sleep, they don't seem to have any emotion and would sell their first born child to get the sale. I've had RE's lie to me through sweet smiles and not bat an eye lid. They aren't all bad though. I dealt with a lot of them.
Note: For the sake of, I dunno, kindness? I won't name names. I'll use generic companies but I'm not out to get sued for defaming anyone yeah?
When I first started looking for houses, there were a lot of areas out of my price range. I didn't know where or how to look, so I started with what I knew - online. I lived and breathed houses for months. I spent all of my spare time looking at houses online, or looking at houses in person. I bored the shit out of my friends with house talk and begged for time off work to meet RE's to do inspections.
I was trying to stay within the Brisbane City Council area, but this was VERY difficult. Areas like Acacia Ridge and Sunnybank were just out of range, the houses that came on in the price bracket were gone before I even had time to ring up. I had to move the bar out a bit furthur.
There were few areas I could afford at this point. Logan and Ipswich. For Brisbanites, most people would know they aren't the most desirable areas. But hey, we all have to start somewhere right? A house is an investment and the areas had (and still have) great growth.
Areas Circled (Click on the map to make it bigger)
I have to admit, I wasn't a fan of either areas. The better parts of both areas are still reasonably pricey and the areas within the range were in areas close to highways, dumps or had higher crime rates. That said, Haley and I were already prepared to change lifestyles for our own house, so it really came down to getting a place that we'd be comfortable living in. In any case, I preferred Ipswich to Logan simply because I preferred the west side.
I started looking around areas of East Ipswich - Riverview and other areas that sound reasonably nice but aren't. Most of the houses were pretty dumpy on in places that were almost completely desolate. One house was on a street with two other condemned places. The others were just tips. One was next door to a council dump.
Don't get me wrong, there are tons of fantastic houses in Ipswich. An extra $100,000 would have changed the game significantly, but at that point that wasn't possible. If I had chosen to invest a few years earlier I would have been even luckier, but hey, hindsight is 20/20 isnt it. There was just nothing safe, comfortable or even resembling a community around.
I spent a few more weeks looking in Ipswich but eventually decided to give up. It wouldn't have been feasible to live further West since both of us worked in Brisbane and it would have added quite a significant amount of time to journeys. I didn't really deal with any real estate agents in Ippy - most of them didn't bother to return my calls and the ones that did weren't helpful.
I changed my sights to Logan.
The market seemed to be larger for my price range there. I found quite a few properties on the web but I learnt my first lesson - houses in websites are almost never still available. The ones that are usually have something wrong with them ;)
Real Estate websites generally leave properties lying around online for weeks, usually to drum up interest so they can get you on to other properties. I'd ring up about houses and find they were "Under Contract" and weren't for sale.
Note: Under Contract is when a purchasing contract has just been signed on a house and its going under preparations for sale (waiting for finance usually). It's not a guarantee the house has been sold but legally no other offers can be put down, although some RE's might take "backup" offers, which are pretty dodgy IMO.
Sometimes the RE's would go all the way to the extent of taking me to a house and THEN telling me it was under contract. That was irritating. Save yourself some time and ask them if the house has any offers on it before they take you out.
I saw about 6 houses in Logan (when I say saw, I mean that I went inside and had a proper inspection. I drove past about 20-25 houses). All of them were with the same RE - she was quite nice. She was unusally honest too. I'd find later once I started looking back in Brisbane that she was the exception to the rule.
The only house in Logan that was remotely decent was in a place called Slacks Creek. Slacks Creek also happened to be right next to Woodridge, possibly one of the worst suburbs in Greater Brisbane. The house was on the market for $210,000 - it was a 3 bedroom, 1 bathroom with lockup garage. Pretty standard first house. Was on a little cul-de-sac with walking access (no direct car) to main road.
The house was quite new - which was different from the other dumps we were shown in the respect that it was built in the last 10-15 years, rather then 30 or so. But, it was small. Extremely small, even for two people. The bedrooms were tiny, the kitchen was even smaller and the living/diner was barely big enough for two pieces of large furniture.
On the flipside, it was in great condition, on a quiet street and close enough to shops and highway. I knocked on a few doors and talked to some neighbours (brilliant way to get local knowledge, since RE's like to bullshit a lot) and got reasonably decent responses. It was ok. Not what I ultimately wanted, but ok.
Haley didn't really like it, and I didn't blame her. We both knew we'd have to make lifestyle changes but this was more then we wanted to change. We'd be far away from everything - work, friends, family. We didn't like the area at all. The street had shopping trolleys and rubbish, junk in people's yards and such. I'd lived long enough in Brisbane to know bad areas and I knew this was one of them. Two of the neighbours said that breakins happened at least a few times a year.
Fantastic.
I mulled over this place for ages. It was a good price, under budget. The house was structually fine. I knew that if it was going to happen, this would be the place. I even had the paperwork in front of me at one point, but I just walked out on it. I just could not in good concience purchase this house. I knew that I would regret it later and everything about it felt wrong.
I gave up for a bit. Then everything changed.
I managed to sort out some creative financing that allowed me to get more money. About $80,000 or so. This basically pushed me into an entirely different pricing bracket altogether, which meant being able to purchase in Brisbane proper. Essentially, without it, I probably would still be renting right now.
I'll take a hiatus from the overall story to talk a little bit more about my experience with Real Estate agents.
I'll be blunt - I cannot stand them. Everything about them is just arrogance, greed, manipulation. There are no ethics or morals in property. In fact, one of them essentially defected and became a quite a famous voice for ethics and change in the industry - Jenman - but I'll get to him later.
RE's live off commission. They don't make any real money until they sell houses. They get salaries, of course, but the big bucks are in % cuts of final sale properties. So, the higher the sale price, the more cash they walk away with. This can be tens of thousands on one sale.
Because of this, they will do anything to secure sales. They will lie about contracts, they will lie about offers, they will push and push you to sign extremely important things without giving you time to think. They are rude - they will tell you that your offers are pathetic. They will offer you things like "backup contracts" incase other potential buyers fall through, and will even offer to call and harass them for you.
For the first house I signed a sale contract on, the RE had seen me coming a mile away. She filled the "conditions" part of the contract with so many clauses it was almost impossible to get out of it. And of course, when I found that place was full of asbestos, the sweet woman turned into a bitch from hell, almost challenging me to find a way out. I did. I also learnt a lot of valuable lessons.
Always remember - the RE works for the seller, not for the buyer. They will pretend to support you but they do not give 10 shits about you, before or after signing. Get a decent solicitor and a good friend who knows about property to deal with them.
This might sound like I'm being a bit crazy. I'm not. Ask anyone who has gone through this process and they will have stories of their own. Same situation with sellers. There are lots of good eggs but they aren't anywhere near as numerous as the bad ones. The guy who eventually sold me my house was a complete asshole, but at the very least he was efficient.
The two things I can't stress enough are these - get legals, and get advice. Make sure that anything you are going to sign is read over by a solicitor first. The RE will usually bitch about this - fuck them. This is your life and your money. Its your right and they prey on the fact you're misinformed so they can potentially fuck you to offload crap houses.
The other thing is not be afraid to bargain - the RE's will bitch about this too. Offer what YOU want, regardless of what the RE says. They may advice the seller not to take an offer, but in the end its up to them. A seller will always bargain - it just comes down to finding middle ground.
On the flip side - make RE's work for you. Get them to find you properties. Get them to take you to multiple in one afternoon. Call them at stupid hours if you need to - believe me, they're paid extremely well for it. Get them to come to you if need be. Take advantage of the fact they need the sale more then you do and
Also, take a look at Jenman's site. Jenman is a real estate agent with, *shock horror* ethics and focuses on customer care. He's written a few books and offers all of his information and help for nothing. His website is full of great advice for buyers and sellers in avoiding getting ripped off or generally fucked over by RE's.
In any case, this part went a hell of a lot longer then I thought! More in the next part - I'll try and get these out weekly.
In Part 3 (and possibly 4 and 5 at this rate!) More on the overall story of my purchase, plus Auctions, Nasty Asbestos, The viewing grind and Solicitors!
In future parts I'll also cover Stratas (Body Corporates), private listings and SPECIFIC things to watch for in contracts and a couple of other tidbits. Probably more rants about RE's too. Bastards.
Monday, July 28, 2008
Renting Vs Buying
One of the things people tend to debate about quite a bit is the epic Renting Vs Buying conundrum.
The arguments are as thus:
Renting
The idea behind renting for life comes down to the argument that having a mortgage causes you to spend an outlandish amount of money, up to $700,000 on the average house, on interest payments. The alternative involves, rather, saving those extra amounts you would normally pay on interest into a high return savings account, shares or superannuation earning you up to 9% over the same 25 year period. This provides flexibility on your housing arrangements if you wish to travel or work overseas.
Mortgage
The idea behind a owner occupier mortgage is the obvious - investing in property which appreciates in value over time as you live in it and pay back your loan. The more you pay and the more frequently you pay, the less interest you will need to pay to the bank. You can increase the value of your home with additions and renovations, as well as avoid issues associated with renting. It's generally more stable and secure.
Both arguments are sound. But I personally see a flaw in the Renting argument.
That flaw is living in Australian culture. Why? Because our culture is all about lifestyle. We love to consume. We love to travel. We love new toys, new types of beer, going to Bunnings, buying jet skis and boats we never use.
The renting argument relies on the fact that you will save at least 1/4-1/3 of your income on a monthly basis and invest it somehow. Not only that, but you will do it for 25 years without fail.
For some people, this is easy. They don't feel like they need a lavish lifestyle and are good with their money. But for most, the majority, don't. They like to go out on weekends, to buy that new Wii game, to have 6 ebay auctions going at once. It would be extremely difficult for them to find ways to cut $1000 out of their income.
A mortgage forces you to save money. You have no choice but to pay the bank. Anything left over is yours to spend how you please, just without the guilt of savings. So that way, the next time you go on holiday, you *really* know you could afford it.
The arguments are as thus:
Renting
The idea behind renting for life comes down to the argument that having a mortgage causes you to spend an outlandish amount of money, up to $700,000 on the average house, on interest payments. The alternative involves, rather, saving those extra amounts you would normally pay on interest into a high return savings account, shares or superannuation earning you up to 9% over the same 25 year period. This provides flexibility on your housing arrangements if you wish to travel or work overseas.
Mortgage
The idea behind a owner occupier mortgage is the obvious - investing in property which appreciates in value over time as you live in it and pay back your loan. The more you pay and the more frequently you pay, the less interest you will need to pay to the bank. You can increase the value of your home with additions and renovations, as well as avoid issues associated with renting. It's generally more stable and secure.
Both arguments are sound. But I personally see a flaw in the Renting argument.
That flaw is living in Australian culture. Why? Because our culture is all about lifestyle. We love to consume. We love to travel. We love new toys, new types of beer, going to Bunnings, buying jet skis and boats we never use.
The renting argument relies on the fact that you will save at least 1/4-1/3 of your income on a monthly basis and invest it somehow. Not only that, but you will do it for 25 years without fail.
For some people, this is easy. They don't feel like they need a lavish lifestyle and are good with their money. But for most, the majority, don't. They like to go out on weekends, to buy that new Wii game, to have 6 ebay auctions going at once. It would be extremely difficult for them to find ways to cut $1000 out of their income.
A mortgage forces you to save money. You have no choice but to pay the bank. Anything left over is yours to spend how you please, just without the guilt of savings. So that way, the next time you go on holiday, you *really* know you could afford it.
Experiences of a House Purchase - Pt.1
I originally wrote a blog in early 2007 about my house experiences, but ended up completely wussing out and deleting it.
This was a stupid decision.
I lost a lot of fantastic information and a lot of people were interested in how it went down. So, due to popular demand and my urge to add to the increasing amount of unread blog posts on the internet, I will re-write my personal experiences.
I live in Australia, so obviously, my situation is Australia centric. But a lot of what I experienced would be the same across the western world, so it could be interesting to overseas readers.
Also, please take what you read as my personal opinion. Please take your own situation into account and talk to a financial advisor or solicitor before you do anything massive like sign a contract or accept a loan.
Part One - Making the first move
I first started my house search in early 2006. I had already done my university stint, as well as a fair amount of travel (Europe and Asia), and pretty much figured that I was going to stay in Brisbane. I had a lot of good relationships, connections and a good job on the way so I wasn't worried about being tied down. I quite like this city.
Bit of background. I was 23 at the time, single (in terms of purchasing) and was looking for a 3bed, 1 bath house to purchase. I wasn't interested in a unit or townhouse due to the terrible problems I'd had with strata's while renting and was very game to get out of the shit.
My cousin had recently purchased a house in the middle south-west corner of Brisbane for an extremely interesting price (sub $200,000) which had intrigued me about the area. I looked into prices and found that the recent 4 year boom hadn't really hit things too hard there. The trend had gone up, but not at the ridiculous rate the rest of the city had gone.
At the time I wasn't making a lot of money, sub 40's in fact. This had, as you can imagine, restricted the amount of money I could borrow. A few online calculators (any bank or lender website will have one like this) put me in the spot of around $250,000, at the max. Speaking directly to financial planners or mortgage brokers varied though - some got back figures ranging from $220k to $270k. Interestingly enough, non-bank lenders (at the time) were willing to provide a lot more money at a lower rate then the banks.
Note: This was pre-credit crunch. You'd be lucky if a non-bank lender will give you anything without a ton of LMI (Lender Mortgage Insurance) nowadays, but I'll go into that later.
This made me think. I didn't have any capital. I had about $10k in sitting in shares but I didn't want to touch that. I would probably have to borrow the lot and hope like hell that house prices didn't drop. I jumped on the net and read a hell of a lot about real estate speculation, trends in Brisbane and essentially educated myself on all things buying.
I cannot recommend this more. The 'net is a ridiculously amazing pot of information - there's heaps of free places to scout things like area profiles (trends of sale prices in an area, populations, crime rates) - RPData is a good one, although some of the meatier info costs money. It's also good for getting independant market values, since real estate agents like to embellish a tad. But, again, more on that later.
One of the first things you should do, even if you are just thinking of buying, is to hit up a mortgage broker. Now, a lot of people are mixed on mortgage brokers. But they are really a nessessary evil. You can, obviously, just walk into a bank, ask for the best deal and be on your way. The good thing about a broker is that they can walk you through a lot of the minefields.
They get paid commission from the banks, but if you get a good one they can help you out with advice on the legals, dealing with the bank on your behalf, securing documents for your real estate agent and so forth. They are also a "free" service, since they are paid by the bank who offers you the loan.
But their primary aim is to get you a loan. I first went into a local branch of Mortgage Choice, a pretty big retail mortgage broker in Australia. I sat down with a broker and told him I was looking at purchasing property. The first thing he did was get all of my financials - fulltime work or part time? Credit card debt? Car loans?
He dumped the information into the system, which then spat out a response from all the lenders they deal with. This was interesting. Some offered some great deals, but with interesting conditions. Others offered ridiculous amounts of money for high interest rates.
Note: Variable Vs Fixed Interest rates - Variable rates move up and down at the lender's discrection. Variable home loans usually offer much better deals, but your monthly payments can be unstable. Fixed rates are more secure, since they are locked in for a period of time, but the loan tends to be pretty restrictive too.
I had made the decision previously to deal with a bank, rather then a non-bank lender. Why? Security. It's unlikely for a major bank to go down, but not a smaller lender. The recent issues with sub-prime loans and such have been a pretty good example of that.
I told this to the broker who took them out of the system. Things made a lot more sense after that, since the banks tend to be a lot more conservative. The average amount available for me, at 100% borrowing, was around $250,000. Interest rates? Around 7.25% fixed. I told the broker I'd think about it. But he then asked if I'd like to be preapproved.
A pre-approval is basically a guarantee from the bank that they will give you the money. It's useful to have when you are house hunting, since you can make offers quickly, but most purchase contracts can have conditions like "subject to finance" which means you can get approval post-offer.
The other thing he mentioned, and that I mentioned before, was LMI - Lender Mortgage Insurance. LMI is applied when you borrow more then 80% of the purchase price, and can be a one off fee or a yearly fee. This is so the lender can cover any of the costs involved incase the loan defaults and the lender has to foreclose the property. So basically, unless you have a 20% deposit (which can be a pretty hefty amount), you'll be paying LMI. The broker will usually factor this into your payments too.
Anyway, I didn't bother with pre-approval since I didn't know what I was going to do. He gave me a great first home buyer pack which had a FANTASTIC booklet from the Queensland government, which was basically a step by step guide to everything. Which leads me to my next point...
The other thing you should do is check out the legal situation on purchasing in your state. For example, in the ACT you don't actually purchase your land, you lease it on a 99-year basis, and the government automatically renew it. This is called Leasehold. The land is permanently owned by the federal government (the crown) and there are various conditions involving its use.
In QLD and most other states, 99% of the land is Freehold. This means you own it outright, with a few conditions. Thus, you can do what you like on, or with it, within the law. Its important to talk to a solicitor about any of the legal ramifications of purchasing a house. Make sure you get a good one lined up before you make offers, because believe me, you are going to need them.
Other things like stamp duty, council fees and the other hefty fees should be investigated too. As well, all of the states and territories currently have a "First Home Owner Grant" (FHOG) scheme which allows a buyer to get a cash grant from the govt of around $7000. This comes in very useful.
Anyway, since I knew what I was working with, I started looking a bit more seriously.
Unfortunately, the small amount of money I had restricted my purchasing area. I was then forced to look in area I had previously rejected - which in Brisbane, was Ipswich and Logan.
Like any modern buyer, I went to the net. I found the most useful sites for property were - RealEstate.com.au and Domain. Almost every real estate firm in the country lists homes on these two sites, which makes it easy for you, since the search functions are fantastic.
It's also recommended that you hit the areas you are looking to buy in on the ground. Get a good real estate agent (or two!) and tell them what you want. It works. A few months into my search, I had about 4 agents ringing me with houses before they were on the market - an hour can mean the difference between getting and losing a house. Hit up the windows of the local places too - a lot of the houses don't go online for a few days after the real estate agent takes the job.
But anyway, I'll go into that more in the next part, so stay tuned!
Continued in Part Two - Dealing with Real Estate agents, Jenman, Auctions, Nasty Asbestos, The viewing grind and Solicitors!
I'll also cover things like Stratas (Body Corporates), private listings, things to watch for in contracts and a couple of other tidbits.
This was a stupid decision.
I lost a lot of fantastic information and a lot of people were interested in how it went down. So, due to popular demand and my urge to add to the increasing amount of unread blog posts on the internet, I will re-write my personal experiences.
I live in Australia, so obviously, my situation is Australia centric. But a lot of what I experienced would be the same across the western world, so it could be interesting to overseas readers.
Also, please take what you read as my personal opinion. Please take your own situation into account and talk to a financial advisor or solicitor before you do anything massive like sign a contract or accept a loan.
Part One - Making the first move
I first started my house search in early 2006. I had already done my university stint, as well as a fair amount of travel (Europe and Asia), and pretty much figured that I was going to stay in Brisbane. I had a lot of good relationships, connections and a good job on the way so I wasn't worried about being tied down. I quite like this city.
Bit of background. I was 23 at the time, single (in terms of purchasing) and was looking for a 3bed, 1 bath house to purchase. I wasn't interested in a unit or townhouse due to the terrible problems I'd had with strata's while renting and was very game to get out of the shit.
My cousin had recently purchased a house in the middle south-west corner of Brisbane for an extremely interesting price (sub $200,000) which had intrigued me about the area. I looked into prices and found that the recent 4 year boom hadn't really hit things too hard there. The trend had gone up, but not at the ridiculous rate the rest of the city had gone.
At the time I wasn't making a lot of money, sub 40's in fact. This had, as you can imagine, restricted the amount of money I could borrow. A few online calculators (any bank or lender website will have one like this) put me in the spot of around $250,000, at the max. Speaking directly to financial planners or mortgage brokers varied though - some got back figures ranging from $220k to $270k. Interestingly enough, non-bank lenders (at the time) were willing to provide a lot more money at a lower rate then the banks.
Note: This was pre-credit crunch. You'd be lucky if a non-bank lender will give you anything without a ton of LMI (Lender Mortgage Insurance) nowadays, but I'll go into that later.
This made me think. I didn't have any capital. I had about $10k in sitting in shares but I didn't want to touch that. I would probably have to borrow the lot and hope like hell that house prices didn't drop. I jumped on the net and read a hell of a lot about real estate speculation, trends in Brisbane and essentially educated myself on all things buying.
I cannot recommend this more. The 'net is a ridiculously amazing pot of information - there's heaps of free places to scout things like area profiles (trends of sale prices in an area, populations, crime rates) - RPData is a good one, although some of the meatier info costs money. It's also good for getting independant market values, since real estate agents like to embellish a tad. But, again, more on that later.
One of the first things you should do, even if you are just thinking of buying, is to hit up a mortgage broker. Now, a lot of people are mixed on mortgage brokers. But they are really a nessessary evil. You can, obviously, just walk into a bank, ask for the best deal and be on your way. The good thing about a broker is that they can walk you through a lot of the minefields.
They get paid commission from the banks, but if you get a good one they can help you out with advice on the legals, dealing with the bank on your behalf, securing documents for your real estate agent and so forth. They are also a "free" service, since they are paid by the bank who offers you the loan.
But their primary aim is to get you a loan. I first went into a local branch of Mortgage Choice, a pretty big retail mortgage broker in Australia. I sat down with a broker and told him I was looking at purchasing property. The first thing he did was get all of my financials - fulltime work or part time? Credit card debt? Car loans?
He dumped the information into the system, which then spat out a response from all the lenders they deal with. This was interesting. Some offered some great deals, but with interesting conditions. Others offered ridiculous amounts of money for high interest rates.
Note: Variable Vs Fixed Interest rates - Variable rates move up and down at the lender's discrection. Variable home loans usually offer much better deals, but your monthly payments can be unstable. Fixed rates are more secure, since they are locked in for a period of time, but the loan tends to be pretty restrictive too.
I had made the decision previously to deal with a bank, rather then a non-bank lender. Why? Security. It's unlikely for a major bank to go down, but not a smaller lender. The recent issues with sub-prime loans and such have been a pretty good example of that.
I told this to the broker who took them out of the system. Things made a lot more sense after that, since the banks tend to be a lot more conservative. The average amount available for me, at 100% borrowing, was around $250,000. Interest rates? Around 7.25% fixed. I told the broker I'd think about it. But he then asked if I'd like to be preapproved.
A pre-approval is basically a guarantee from the bank that they will give you the money. It's useful to have when you are house hunting, since you can make offers quickly, but most purchase contracts can have conditions like "subject to finance" which means you can get approval post-offer.
The other thing he mentioned, and that I mentioned before, was LMI - Lender Mortgage Insurance. LMI is applied when you borrow more then 80% of the purchase price, and can be a one off fee or a yearly fee. This is so the lender can cover any of the costs involved incase the loan defaults and the lender has to foreclose the property. So basically, unless you have a 20% deposit (which can be a pretty hefty amount), you'll be paying LMI. The broker will usually factor this into your payments too.
Anyway, I didn't bother with pre-approval since I didn't know what I was going to do. He gave me a great first home buyer pack which had a FANTASTIC booklet from the Queensland government, which was basically a step by step guide to everything. Which leads me to my next point...
The other thing you should do is check out the legal situation on purchasing in your state. For example, in the ACT you don't actually purchase your land, you lease it on a 99-year basis, and the government automatically renew it. This is called Leasehold. The land is permanently owned by the federal government (the crown) and there are various conditions involving its use.
In QLD and most other states, 99% of the land is Freehold. This means you own it outright, with a few conditions. Thus, you can do what you like on, or with it, within the law. Its important to talk to a solicitor about any of the legal ramifications of purchasing a house. Make sure you get a good one lined up before you make offers, because believe me, you are going to need them.
Other things like stamp duty, council fees and the other hefty fees should be investigated too. As well, all of the states and territories currently have a "First Home Owner Grant" (FHOG) scheme which allows a buyer to get a cash grant from the govt of around $7000. This comes in very useful.
Anyway, since I knew what I was working with, I started looking a bit more seriously.
Unfortunately, the small amount of money I had restricted my purchasing area. I was then forced to look in area I had previously rejected - which in Brisbane, was Ipswich and Logan.
Like any modern buyer, I went to the net. I found the most useful sites for property were - RealEstate.com.au and Domain. Almost every real estate firm in the country lists homes on these two sites, which makes it easy for you, since the search functions are fantastic.
It's also recommended that you hit the areas you are looking to buy in on the ground. Get a good real estate agent (or two!) and tell them what you want. It works. A few months into my search, I had about 4 agents ringing me with houses before they were on the market - an hour can mean the difference between getting and losing a house. Hit up the windows of the local places too - a lot of the houses don't go online for a few days after the real estate agent takes the job.
But anyway, I'll go into that more in the next part, so stay tuned!
Continued in Part Two - Dealing with Real Estate agents, Jenman, Auctions, Nasty Asbestos, The viewing grind and Solicitors!
I'll also cover things like Stratas (Body Corporates), private listings, things to watch for in contracts and a couple of other tidbits.
A new blog eh?
I created this blog originally to write about my experiences purchasing a property, but decided there's a couple of other bones I have to pick so it'll probably be about anything and everything.
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